Using Benfordís Law to detect tax fraud in international trade

Abstract: Smuggling, along with other forms of border tax evasion, is a substantial problem around the world. This column uses Benfordís Law, which suggests that the leading digits in various types of numerical data are not uniformly distributed, to identify suspicious import flows. Results using Turkish data suggest that deviations from Benfordís Law are consistent with higher rates of tax evasion. The approach could be employed by authorities to identify shipments that merit greater scrutiny.